STATE BANK OF PAKISTAN

STRATEGIC PLAN 2005-10

Table of Contents

1 STRATEGIC PLANNING PROCESS...............................................................4

1.1 Strategic Planning Framework.......................................................................................5

2 THE STRATEGIC PLAN OF THE SBP 2005-10 .............................................6

2.1 Functional Strategies......................................................................................................6

2.2 Management Strategies................................................................................................11

2.3 SBP BSC......................................................................................................................14

2.4 NIBAF..........................................................................................................................14

Annexure

1 STRATEGIC PLAN OUTLINE........................................................................16

2 LIST OF ACRONYMS.....................................................................................23

1 STRATEGIC PLANNING PROCESS The strategic planning process employed by the SBP was participative, consultative and result-

oriented. While the overall direction was provided by senior management1, the action plans were

evolved at the departmental level to ensure ownership and commitment of those charged with

implementing the plan. The role of the Strategic Planning Unit (SPU) was that of catalyst, facilitator

and synthesizer, to guide the planning process effectively.

The SPU held a series of orientation meetings for all the departmental clusters between November 4

and 18, 2004 to share with them the basic strategic planning model employed by the SBP. A concept

paper on strategic planning, approved by the Corporate Management Team (CMT), highlighted the

importance of the strategic planning function and charted out a roadmap for the completion of the

planning process by December 18, 2004. All the relevant documents were also posted on the

Electronic Notice Board (ENB) for the information and knowledge of all employees.

Individual departments were requested to do their respective environmental scans through a SWOT

analysis whereby they identified their internal strengths and weaknesses as well as the external

opportunities and threats. All departments of the SBP along with the SBP Banking Services

Corporation (SBP BSC) were grouped into five clusters. The individual department’s SWOT analyses

were consolidated by the cluster representatives.

Banking Cluster FRM Cluster Research Cluster Support Cluster Services Cluster

Banking Policy, Supervision and Inspection Departments and Islamic Banking Department.

Exchange and Debt Management, Exchange Policy, Payment Systems, Accounts and Audit Departments, Risk Management Division and RTGS Project.

Economic Policy, Research, Statistics Departments and Agricultural Credit Department 2.

Human Resources, Information Systems, Corporate and Media Affairs Departments, Legal Services Division, and Project Management Office.

SBP BSC; Medical Services, Engineering and Internal Bank Security Departments.

The Strategic Planning Workshop, held from 29 November to 2 December 2004, brought together the

nominated cluster representatives along with all the Head of Departments (HoDs) to formulate their

strategic plans for the next five years. The workshop was organized in collaboration with the

HayGroup and AASA consultants. The HoDs were also requested to hold departmental meeting

before and after the workshop to obtain feedback from the rest of their employees. After the

workshop, special meetings were held with the Pakistan Bankers Association (PBA) and the SECP to

seek their comments and recommendations. The cluster level strategic plans were also posted on the

ENB for review by all the employees.

1 Pakistan’s Financial Sector: A Roadmap for 2005-2010 and Concept Paper for Strategic Plan 2005-10 by Dr. Ishrat Husain, Governor SBP. 2 Agricultural Credit Department was included in the Banking Cluster during the Strategic Management Conference.

5

The plans were then refined and amended during the Strategic Management Conference (SMC), held

on 17 and 18 of December 2004, to take account of feedback received from both internal and external

stakeholders. The strategies were also prioritized in terms of their importance for resource allocation

in the annual business planning cycle. The strategies, which had linkages across various clusters,

were identified and cross-functional teams were developed. The respective Policy Groups were made

in charge of monitoring these cross-functional initiatives.

After approval of the Strategic Plan 2005-10 by the Board of Directors (BoD) of the SBP, the

document will serve as a blueprint of the Central Bank’s agenda for the next five years. The changing

circumstances will however, warrant constant review and monitoring to keep it relevant, strategically

agile and continuously aligned with the Central Bank’s overall mandate.

The Strategic Plan will be operationalised through successive Annual Business Plans. Allocation of

resources for various activities will be guided by the priority given under the Strategic Plan. The

Strategic Plan will itself be a rolling plan which will be reviewed and monitored at the Annual

Conference for Senior Managers and modified in light of the circumstances and conditions prevailing

internally and externally. Stakeholder surveys will be the main instruments to obtain the feedback on

implementation and review.

1.1 Strategic Planning Framework

Department level

Cluster level

Corporate level

Strategic Planning FrameworkPlanning Levels

Department level

Cluster level

Corporate level

Strategic Planning FrameworkPlanning Levels

Strategic Priorities andPerformance Objectives

Internal Analysis External Analysis

VisionMission

Functional Strategies andManagement Strategies

Strategies and theirintegration revisited

Resource Allocation andManagement

Budgeting Guidelines

Internal Analysis External Analysis

Proposed Strategy, Accountability and Performance Measures

Internal Analysis External Analysis

VisionMission

Strategic Priorities andPerformance Objectives

Internal Analysis External Analysis

VisionMission

Functional Strategies andManagement Strategies

Strategies and theirintegration revisited

Resource Allocation andManagement

Budgeting Guidelines

Internal Analysis External AnalysisInternal Analysis External Analysis

Proposed Strategy, Accountability and Performance Measures

Internal Analysis External AnalysisInternal Analysis External Analysis

VisionMission

2 THE STRATEGIC PLAN OF THE SBP 2005-10 The SBP’s strategic objectives are aligned with its functional priorities. During the next five years, the

SBP will continue to ensure (i) soundness of the financial sector, (ii) effective monetary management

of the economy, (iii) prudent exchange and reserve management, and (iv) efficient and sound

payment systems.

2.1 Functional Strategies To ensure the soundness of the financial sector, the SBP will focus its efforts on financial sector

deepening, proactive supervision and regulation of financial institutions, strengthening of financial

sector, privatization of the Public Sector Banks and divestment of Government shares in privatized

banks, and promotion of Islamic banking as a parallel system.

In the area of monetary management, the SBP will work on developing a forward looking policy

framework, enhancing the effectiveness of Monetary Policy implementation, improving research and

data dissemination capabilities, and deepening the financial markets.

For prudent exchange rate and reserves management, the focus of SBP will be on building in-house

reserve management capacity, liberalizing the capital account in a phased manner, capacity building

in the area of risk management, strengthening of reporting mechanism of exchange companies and

documenting all capital flows especially cash transactions.

The main targets for the SBP to ensure an efficient and sound payment systems will be through

implementation of the RTGS, promotion of E-banking, establishment of an electronic clearing house,

and development of Public Key Infrastructure (PKI) and Digital Certification.

2.1.1 Financial Sector Deepening and Broadening of Access

For financial sector deepening and broadening of access, the short to medium term strategic plan is to

consolidate and build on the existing initiatives in Agriculture finance, SMEs, Mortgage and

Microfinance. The strategy includes strengthening of the exiting microfinance regime and expansion

of agriculture credit to small farmers and for livestock. For the SMEs, as an initial step, delivery of

credit by banks will be monitored and intermediary/technical support organizations will be encouraged

to assist the SMEs in preparing bankable proposals. In the medium term, the staff of the banks will be

trained in program lending and the proposed guarantee scheme by the Government of Pakistan

(GoP) will be established. To pursue this strategy, close coordination will be established with the

Small and Medium Enterprise Development Authority (SMEDA).

The SBP will organize itself internally to respond to the needs of SME and Infrastructure Financing by

inducting skilled manpower in these areas and train younger staff by sending them for attachments.

7

SME, Housing and Infrastructure Finance Divisions will be strengthened with experts in these areas

as well as Securitization and Structured Finance. One of the initiatives that has not made much

headway so far is the Infrastructure/Municipal Bonds, that will open up the financing of long gestation

infrastructure projects to the private sector in partnership with the public sector or on stand-alone

basis. Asset Backed Securitization (ABS) has proved to be quite handy in Oil and Gas, Telecom and

Roads and Highway Projects. The SBP will promote and reinforce the ABS and, as and when a

critical mass of mortgage loans is accumulated, move towards pooling of these loans and structure

them into Mortgage Backed Securities (MBS).

2.1.2 Proactive Supervision and Regulation of Financial Institutions

The SBP plans to formulate an agile banking crisis resolution mechanism through implementation of

Prompt Corrective Action (PCA) regime and reinforce it with modification in the BCO, 1962. In the

short term the cluster plans to enhance market discipline through adoption of International Accounting

Standards 39 and 40, implement IRAF, and enhance the usage of CIB along with the Data

Warehouse (DW). IRAF will also be further modified to reflect the Risk Profiles of each banking

institution and a standardized template will be developed for this purpose (to be filled in by the bank

management and endorsed by their Board). This Risk Profile, as assessed by the Banking Desk, will

also be taken into account in the final composite rating of each bank. Streamlining of data reporting

by banks and DFIs, and ongoing improvements in the inspection procedures will also strengthen the

existing supervisory regime.

As the AML law becomes fully operational, the SBP will facilitate in setting up a Financial Intelligence

Unit (FIU). Contacts will be intensified with the new Economic Crime Wing under the National

Accountability Bureau (NAB) and rules of engagement will be laid down explicitly to prevent, detect,

and prosecute banking crimes. For achieving Consolidated Supervision, cooperation with other

regulatory bodies (foreign and local) will be intensified resulting in enhanced off-site monitoring and

targeted on-site inspections of cross border branches.

In the medium to long term a smooth transition from Basel-I to Basel-II and institutionalization of

stress testing will strengthen the existing risk management regime. To accomplish this task the SBP

plans to enhance internal capacity to assess the banks’ risk measurement, management and

mitigation efforts on a systematic basis. Capacity building of existing staff and hiring of those familiar

with quantitative techniques and modeling, deployment of appropriate software application packages,

collection of relevant data, and conducting of analysis are also planned.

2.1.3 Privatization of the Public Sector Banks and Divestment of Government shares in Privatized Banks

The SBP plans to develop appropriate strategies to facilitate the GoP in privatization and divestment

of the Public Sector Banks including the IDBP, SME Bank and Zarai Taraqiati Bank (ZTBL) and

divestment of remaining Government shares in the already privatized banks. The strategy is to

proactively play its role as an advisor and facilitator of the privatization process by bringing

8

improvements in the selection of strategic investors, due diligence process, and successful

completion of the transactions.

2.1.4 Strengthen the Financial Sector

To further strengthen the financial sector, the SBP will focus on introducing a safety net through the

intended Deposit Insurance Scheme, a phased increase in the regulatory capital requirement, and

acting as catalyst in development of an enabling legal framework for private sector credit bureaus.

Modest progress has so far been made in the consolidation and mergers of financial institutions.

Although the minimum capital requirement has been raised to Rs2 billion, effective from 31st

December 2005, this amount of almost US$35 million is still inadequate in comparison with the trends

in the global banking markets. The SBP is aiming to prescribe US$100 million as minimum capital by

end of 2009 - a three-fold jump from the present levels. At present, there are ten banks with US$100

million capital. The higher capital requirements will allow some medium size banks to emerge and

assuming a capital-assets ratio of 5 percent, enable these banks to book assets up to US$2 billion.

In the coming years, the professional development of the human resource base of banking industry

will be an area of major focus for the SBP. The SBP has formed several working groups of the

banking industry to come up with appropriate recommendations, which after review and approval by

the PBA, will then form the basis of Human Resource Policy guidelines for all the banks to be issued

by the SBP. Human Resource Department (HRD) and National Institute of Banking and Finance

(NIBAF) of the SBP are also involved in the initial stages of this exercise.

2.1.5 Promote Islamic Banking as a Parallel and Compatible System

Islamic Banks are becoming popular not only in Pakistan, but all over the world. The work of

licencing, supervision, regulation, inspection, Shariah Audit, training of personnel of these Islamic

banks or branches are done by the Islamic Banking Department (IBD). A two-pronged approach will

be followed i.e. attracting international banks of quality to locate in Pakistan and nurturing a cadre of

professional Islamic bankers domestically.

2.1.6 Conduct Forward Looking Policy Analysis

It has long been recognized that monetary policy management needs a forward-looking dimension

due to the existence of long lags between policy actions and their intended effects on output and

inflation. The major hurdle in this respect for the SBP is the absence of a formal framework that could

supplement the forward-looking policy analysis. In order to address this limitation, the SBP plans to

build a macro model to make dynamic impact analysis of various policy scenarios. This will be an

inter-departmental task that will help in exploring the inter-linkages in macroeconomic variables,

particularly understanding the transmission mechanism of monetary policy. At the same time, the

SBP plans to strengthen the forecasting group to make it more effective and result oriented.

9

The revision in monetary aggregate is particularly important for the SBP as it anchors its monetary

policy to the monetary aggregate. The SBP proposes to compile M3 on monthly basis. Monetary

survey will also be reviewed, recast and estimates of M3 prepared regularly as part of this survey. At

the initial stage, owing to data constraints, the M3 series will be compiled on quarterly basis.

However, once the data constraints are addressed, the M3 series can be compiled on monthly basis.

2.1.7 Enhance Effectiveness of Monetary Policy Implementation

In the case of Pakistan, the most actively used monetary tool is Open Market Operations (OMO),

though its frequency is quite low (less than 3 per month on average). Experience shows that at times

the market remains significantly liquid or illiquid, as the SBP is not able to intervene at the desired

level and overnight rates face volatility. In order to manage the short-term call money market more

effectively, the SBP plans to introduce the Liquidity Adjustment Facility in Pakistan. The proposed

framework will be subject to a regular quarterly review by the Monetary and Exchange Rate Policy

Committee (MERPC).

The SBP also plans to restructure the existing MERPC in the medium to long term through extending

its membership to two external experts on monetary policy, raising its status as a decision making

body by introducing necessary changes in the SBP Act, and releasing minutes of the meeting to the

public after suitable time lags.

While implementing an effective monetary policy is important, it is equally important to do so in a

transparent manner. Transparency requires a central bank's openness in explaining the rationale for

its specific policy decisions. Transparency insulates the central bank from political pressures. It also

helps market participants to form their expectations regarding future outcomes. There is therefore a

need to educate the public on issues relating to economic policy. This will help in creating better

understanding and public support for needed economic changes. For this purpose, a series of

pamphlets will be published on major economic issues, which will focus on explaining important

economic concepts in simple non-technical language.

2.1.8 Improve Research and Data Dissemination Capability

The SBP provides a candid and objective review of the economy through its flagship publications

(monetary policy statement, annual report, quarterly report, financial sector assessment, financial

markets review, and banking sector review). However, there is a need to continuously improve the

quality and depth of analysis by producing new insights and more in-depth analysis. With a view to

enhancing the coverage in the area of prices, the SBP plans to publish the Monthly Inflation Monitor

that will contain analytical charts and tables on prices. At a later stage, this document will be

transformed into an Inflation Report that will not only evaluate the developments in inflation and

economic conditions, but also analyze the linkages between monetary developments and inflationary

trends. In addition, this document may be integrated with the output of inflationary forecasting model

(which will be developed as a part of the macro model).

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At the same time, it is essential to work on topics of direct operational relevance for the monetary and

exchange rate policy, inflation, international trade, and domestic & external debt. With a view to

improving its profile in scientific research the SBP plans to substantially increase the quantum of

working paper by 2010. In addition, SBP is also working to launch an annual Research Bulletin,

which will be a journal of peer-reviewed papers.

The SBP plans to estimate expenditure patterns on the basis of annual surveys conducted by Federal

Bureau of Statistics (FBS). The monitoring and analysis of expenditure patterns is important for

determining the impact of economic policies on income distribution, poverty, consumption and saving

behavior.

The SBP is also planning to develop a mechanism for periodic review of all data series compiled.

Some of the statistical series have outlived their utility whereas information on other highly useful

variables such as employment, nominal and real wages, corporate debt, household debt, real estate

and construction price indices are missing. Primary data collection is at present limited to banking

and monetary statistics. This strategy will help in increasing the scope, coverage and quality of data

to support policy makers, researchers and other stakeholders.

2.1.9 Deepening of Financial Markets

New financial products will be traded in the Money/Bonds market by the introduction of Zero Coupon

Yield Curve through the bootstrapping process, Bond Stripping and development of a GoP Bond

Index. Recognizing the need for tradable financial instruments for Islamic banking treasury

operations, the SBP plans to design and implement these new instruments.

The SBP is planning the listing of government securities particularly Pakistan Investment Bonds

(PIBs) on the stock exchange. This will broaden the investor base through inclusion of retail/small

institutions.

2.1.10 Prudent Exchange Rate and Reserves Management

SBP’s Foreign Exchange reserves have risen steadily in the past four years touching a level in excess

of US$10 billion. Foreign exchange reserves form part of the national assets and these needs to be

deployed rationally keeping in mind the principles of safety, liquidity, and return. The reserves, which

are currently deployed by the SBP’s in-house reserve management treasury dealers, are in short-term

high quality bank deposits. The SBP plans to improve the return on these reserves, within the Central

Board’s approved risk parameters, through capacity building of the front, middle and back offices and

to develop competitive benchmarks for future performance.

The SBP is presently monitoring exchange companies through weekly returns and on-site

inspections. Exchange companies in Category B have already been given one year to organize

themselves, appoint the Chief Executives with proper qualifications and experience and to automate

systems. The SBP plans to develop an effective monitoring system for these companies. There is

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also a strong need to have on-line real time monitoring of these companies, which the SBP plans to

establish by end of 2006. In the past, attempts have been made by these companies to take out

foreign exchange without declaration or a proper reconciliation, leaving room for capital flight. The

SBP plans to develop an effective mechanism to control capital flight through airports in close

coordination and collaboration with Customs Authorities and Civil Aviation Authority (CAA).

Capital Account convertibility plan will be evolved in a phased manner so that the immediate impact

on balance of payments remains limited and manageable. Once the experience from this partial

liberalization is gathered, the next round of reforms can be designed for further movement in this

direction. Foreign Exchange Regulations Act (FERA), 1947 will also be updated to make it in sync

with the Economic Reforms Act, 1992.

2.1.11 Efficient and Sound Payment Systems

RTGS will be completed by December 2005. To reduce the settlement time significantly and increase

cost effectiveness the SBP plans to establish an electronic clearinghouse. Instead of paper cheques,

its image will be forwarded by payee’s bank using secured network and the clearing will be done

automatically. The SBP also plans to promote accelerated adoption of E-banking and ensure that all

banks get networked and connected electronically within the next two years. Security of online

payment processing is vital for promotion of e-commerce, and the Central Bank is playing a key role

in the development of a cost effective infrastructure for PKI and Digital Certification.

2.2 Management Strategies Management Strategies for SBP link up with the functional strategies to ensure that the supporting

infrastructure is available to effectively implement the plans. The focus of the management strategies

remain on increasing employee attraction, retention and motivation, institutionalizing succession

planning, implementing the remaining part of the Information Technology project and the transition

plan, and preparing substantive legislation for new products and areas like e-banking. The SBP will

also focus on strengthening its Business Continuity Process (BCP), enhancing its Management

Information System (MIS), streamlining its procedures through Business Process Re-engineering

(BPR), and a stronger risk based and IT audit function.

2.2.1 Human Resource Development

The SBP plans to increase employee attraction, retention and motivation by reducing recruitment

timelines, devising innovative compensation and benefit plans, establishing employee counseling,

providing equitable training opportunities and enhancing the Performance Management System

(PMS). To develop the capacity to offer market based targeted compensation and benefits packages

for the high performers, line managers’ ability to provide performance-based incentives is being

enhanced. Moreover, flexi benefits plan are being introduced to address the needs of a diverse

workforce. Equitable training opportunities will be identified for line and support staff through

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specialized higher education to ensure continuous up-gradation of skills and knowledge base in their

respective areas. The SBP also plans to further enhance the PMS to bring transparency and

objectivity to decisions regarding employee career management.

In addition to the present training opportunities, employees will be encouraged to spend some time

acquiring on-the-job experience of commercial banking and capital markets. This objective will be

achieved through a variety of methods – secondment, deputation, short-term assignments,

attachment, and leave without pay. To enhance the career prospects of well-qualified staff, who will

eventually assume leadership positions in the SBP, job opportunities of specific duration with

international organizations such as Bank of International Settlement (BIS), International Monetary

Fund (IMF), World Bank, Asian Development Bank (ADB) and Central Banks and Regulatory

Agencies will be identified. Participation in assessment missions and technical assistance projects

will also be solicited for those who wish to limit themselves to short duration assignments. As

mentioned above, SBP also plans to play a proactive role in introducing best HR practices in the

banking and financial industry and develop its professionals on an ongoing basis.

2.2.2 Information Technology Up-gradation

The IT project is planned for completion by September 2005 and will subsequently be handed over by

the Project Office to the Information Systems Department (ISD). Successful transition is very critical

for the operation of the new system and provision of efficient services. After completion of the

remaining tasks of the IT project like ERP, Globus, DW and rollout, the IT Project Management Team

plans to prepare a transition plan with timelines and milestones for approval and monitoring by the IT

Steering Committee.

The data analysis requirements of the institution and the need to use appropriate business

intelligence applications are ongoing. It is the long-term plan of the IT team to keep the quality of

application up-dated as per the business needs of the SBP to improve its data management capacity.

The IT team further plans to establish an IT security framework and improve it by deploying an

appropriate set of security policies.

2.2.3 Effective Communication Strategy

The feedback received from External Stakeholders Survey 2004 showed a high level of satisfaction

amongst both the direct stakeholders as well as the indirect stakeholders with the quality and content

of information disseminated by the SBP through its various periodic reports. However, timeliness

seems to be an issue. Based on this feedback the SBP plans to further enhance its image as the

provider of reliable and accurate data and analysis. A new Communication Policy was finalized at the

SMC 2004 to address this need. The policy will be both responsive as well as a proactive in nature.

The SBP is also planning to establish a learning resource centre within the new SBP Library so that

relevant people (media, students, academics, researchers, etc.) are able to access information on

finance, economy as well as the SBP’s various activities.

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2.2.4 Strengthening of Legal Framework

A number of new areas are emerging where the SBP plans to venture or has already initiated work,

like E-banking, Deposit Insurance Scheme, Electronic Clearinghouse, PKI, Exim Bank and Digital

Certification. The SBP plans to help formulate and strengthen the legal framework governing these

areas. Many of the functional strategies listed above encompass either updating/changing the

existing legal frameworks or facilitation of enactment of new laws in areas like AML, Private Credit

Bureaus, Banking Crisis Resolution, Islamic Banking, Capital Account Liberalization and legislation for

Government Securities.

2.2.5 Strengthening of Contingency Mechanisms

To ensure continuity of critical functions (time sensitive) of the SBP and prevent any major disruption

in financial system of the country the SBP plans to establish a technology Disaster Recovery Center

(DCR) to cope with any interruption due to a technology fault or a disaster. The enforcement

mechanisms to ensure regular testing and up-dating will be in place by end 2005 and will be

coordinated by the Business Continuity Process (BCP) coordinator with the relevant critical

departments.

2.2.6 Business Process Re-engineering

The focus of Business Process Re-engineering (BPR) is to enhance the operational efficiency and

internal controls by removing redundancies in business processes while taking advantage of the

implementation of Globus banking solutions, Oracle Enterprise Resource Planning (ERP) and RTGS.

The completion of existing BPR relating to centralized payment and procurement functions will be

completed in 2005. In order to enhance efficiency and reporting of Government Accounts,

implementation of a new Chart of Accounts and development of interface for Globus with the Project

for Implementation of Financial Reporting and Accounting (PIFRA) is planned.

2.2.7 Management Information System

Implementation of Globus, ERP and RTGS will further augment and expedite the process of

Management Information Reports/ MIS on online basis. SBP plans to upgrade the existing reporting

to online and expand the current reporting framework by 2006.

2.2.8 Risk based Audit

The SBP plans to develop risk registers for all its departments. The capacity for inspection and audit

of Information Technology (IT) based systems will also strengthened.

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2.3 SBP BSC To supplement the strategic plan of the SBP the SBP BSC plans to focus on providing improved

currency management processes, timely implementation of infrastructure projects and improvement in

the Medical Services for all employees.

Currency Management is the most vital area for SBP SBC. As the retail-banking arm of the central

bank, the SBP BSC has to ensure continuous supply of fresh currency notes and coins. Currency

Management now has become a specialized function and systems and procedures have to be

improved in line with best international practices. The SBP BSC plans to install note-sorting machines,

launch currency notes and coins of new denominations, and proactively supervise commercial banks’

branches to reduce complaints by the general public about the availability of fresh currency. The

Services departments plan to increase service level standards by timely implementation of

infrastructure projects and their maintenance, improved security standards, and better medical

services for the employees of SBP and its subsidiaries.

While contributing to the strategic plan of the SBP, SBP BSC also plans to conduct a separate

planning exercise to ensure the participation of its field offices in the formulation and finalization of its

strategic plan for the next five years.

2.4 NIBAF The strategic plan for NIBAF has been derived from the future training requirements of SBP and SBP

BSC. Here, the main focus during the next five years will be on increasing the scope and coverage of

its activities, including implementation of intermediate and advanced courses as well as specialized

sectoral programs. Collaborative programs with other domestic training institutes will also be devised

and customized regional programs developed to attract delegates from neighbouring countries.

NIBAF will also focus on enhancing the quality and delivery of its programs by revisiting its curriculum

and training material and enhancing the diversity of its faculty. While optimizing the use of its physical

infrastructure and leveraging the use of its IT resources, NIBAF will also ensure that it builds a team of

dedicated professionals who cam maintain the highest service delivery standards for all stakeholders

of SBP and its subsidiaries.

Annexure

1 STRATEGIC PLAN OUTLINE Functional Strategies

Broadening access of formal credit to middle and lower income groups- Small and Medium Enterprises (SMEs), Micro enterprises and through consumer financing

Development of regulatory regime for infrastructure financing

Strengthening of Housing Finance Regime

Enhancement of volume and scope of agricultural credit through new schemes

Research and Special Studies needs of agricultural credit (and microfinance)

Strengthening of the Export Finance Regime

Fina

ncia

l Sec

tor D

eepe

ning

an

d B

road

enin

g of

Acc

ess

Dissemination of knowledge regarding SBP efforts To formulate agile and proactive resolution mechanism for Banking Crisis

Strengthening of Supervisory Regime

Streamlining data reporting by banks / DFIs

Development of regulatory frame work for E-Banking

Implementation of Basel-II Capital Accord

Make Pakistan Banking System compliant to AML regime

Consolidated Supervision of Banks/DFIs

Pro

activ

e S

uper

visi

on a

nd

Reg

ulat

ion

of F

inan

cial

In

stitu

tions

Create Consumer Awareness

Priv

atiz

atio

n of

Pub

lic S

ecto

r B

anks

and

Div

estm

ent o

f G

over

nmen

t Sha

res

in

Priv

atiz

ed B

anks

Development of strategy to restructure and privatize IDBP, ZTBL and SME Bank

17

Functional Strategies

Strengthening of capital base of banking system

Introduction of Safety nets in the banking system

Encouragement of Private sector Credit Bureau

Stre

ngth

enin

g of

Fi

nanc

ial S

ecto

r

Augmenting the “fit and proper regime” for professionalization and development of human resource base of banking industry

Pro

mot

e Is

lam

ic

Ban

king

as

a P

aral

lel a

nd

Com

patib

le

Sys

tem

Promotion & Strengthening of Islamic Banking Regime

To develop a framework for forward looking policy analysis (Macro Modeling)

To improve use and effectiveness of data to support policy and research

Forw

ard

Look

ing

Pol

icy

Ana

lysi

s Fr

amew

ork

Enhance coverage of monetary aggregates

Better Liquidity Management through Introduction of Liquidity Adjustment Facility

Enha

nce

Effe

ctiv

enes

s of

M

onet

ary

Pol

icy

Impl

emen

tatio

n

Creation of an effective Monetary Policy Committee in place of existing Monetary and Exchange Rate Policy Committee (MERPC)

To improve quality and dissemination of research

Impr

oved

R

esea

rch

and

Dat

a D

isse

min

atio

n C

apab

ility

Improve interaction with stakeholders

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Functional Strategies

Listing of Government Securities on Stock Exchange

Deepen the financial markets by introduction of additional / variants of financial derivatives

Deepening of Money / Bond Markets by allowing new Financial Products (Zero Coupon Yield Curve through Bond Stripping, GoP Bond Index)

Development of Islamic Money Market

Revision and Replacement Legislation for Government Securities

Providing Regulatory Support for Supra National Local Currency Bonds (LCBs) e.g. ADB

Dee

peni

ng o

f Fin

anci

al M

arke

ts

Proactive Public Debt Management in coordination with Public Debt Office, Ministry of Finance In-house Reserve Management through Capacity Building of Front, Middle and Back Office

Scope enhancement and unification of Risk Management process in the SBP

Detailed evaluation and recommendation for alignment of provision of Foreign Exchange Regulation Act (FERA), 1947 with the current context

Strengthening supervision of Exchange Companies monitoring through on-line reporting

Developing polices / mechanism for documenting all capital flows specially cash transactions

Assessment & progressive integration of capital account liberalization in a phased manner

Pru

dent

Exc

hang

e R

ate

and

Res

erve

s M

anag

emen

t

Devising policy stance / mechanism inherently averse to all speculative activities impacting Forex Market

Implementation of Real Time Gross Settlement System (RTGS)

Facilitation in development of Public Key Infrastructure (PKI) & Digital Certificate Infrastructure

Promotion and facilitation of e-banking / commerce within the country

Establishment of Electronic Clearing House

Integration of Payment System with other settlement systems (local and foreign)

Effi

cien

t and

Sou

nd

Pay

men

t Sys

tem

Development of Securities Settlement System for Secondary Market

19

Management Strategies

Improve employee attraction & retention

Institutionalize succession planning

Help in producing of banking professionals for export of financial services to target markets

Enhance SBP’s image as employer of choice

Reduce response time for organization’s HR specific needs Hum

an R

esou

rce

Dev

elop

men

t

Enhance HR’s role as strategic partner

Implementation of remaining tasks of the (IT) Project

Improve IT security framework

Implementation of Transition Plan

Improve data management capacity of the organization

Further improve provision of expert services to financial industry & other stakeholders

Catalyze progress on Disaster Recovery Plan (DRP)

Align IT strategies to achieve business goals

Improve services to internal customers (SBP & Subsidiaries) Info

rmat

ion

Tech

nolo

gy U

p-gr

adat

ion

Enhance IT resource skill base

Improve communications with stakeholders

Effe

ctiv

e C

omm

unic

atio

n S

trate

gy

Proactively participate in corporate citizenship initiatives

20

Management Strategies

Stre

ngth

enin

g of

Le

gal

Fram

ewor

k Preparation of substantive legislation along with rules and regulations

Stre

ngth

enin

g C

ontin

genc

y M

echa

nism

s

Strengthening of Business Continuity Process (BCP) by establishing a technology Disaster Recovery Center

Business Process Re-engineering to improve processes in sync with implementation of technology and RTGS

To improve use and effectiveness of data to support policy and research

Enhancing efficiency and reporting of information relating to Government Accounts

Bus

ines

s P

roce

ss

Re-

engi

neer

ing

Removing hurdles in achieving seamless coordination between policy and operations in the areas of Accounts, Audit and Exchange Policy

Man

agem

ent

Info

rmat

ion

Sys

tem

Enhancing Content and timeline of Management Information Reports on the basis of implementation of Globus and ERP

Specific customized audit training on Globus, ERP and RTGS

Ris

k B

ased

A

udit

Developing Risk Registers for all Departments of the SBP

21

SBP BSC

Improve Currency Management – Sorting / Destruction Processes Ef

ficie

nt

Cur

renc

y M

anag

emen

t S

yste

m

Field Implementation of SBP Policies

Improvement in “MSD Patient Service”

Timely implementation of Infrastructure Projects / New Buildings / Major Renovations

Improve Security Measures

Promote Positive Image for the SBP

Upgrade service standards in attending to the grievances of general public and other stake holders

Develop Human Resources

Pro

vide

Effe

ctiv

e B

anki

ng

Ser

vice

s / S

ervi

ces

to

Sta

keho

lder

s

Develop a Strategic Plan for BSC and Improve Operational Efficiency

22

NIBAF

Focus on SBP

Focus on Banks and financial institutions

Incr

easi

ng

Sco

pe a

nd

Cov

erag

e of

Ac

tiviti

es

Collaborative and International programs

Revision of curriculum and training material

Enhance and diversify floating faculty

Enh

ance

Q

ualit

y an

d D

eliv

ery

of

Pro

gram

s

Other multi purpose strategies

Awareness

Incentives

Role model

Customer service orientation

Inculcate urge to learn and express

Incu

lcat

e V

alue

s in

sta

ff

Create a sense of belongingness

Automation

Enh

anci

ng

Cap

abilit

y an

d S

yste

ms

MIS

Maintaining facility to highest standard

Marketing for optimal use of facility

Opt

imal

us

e of

P

hysi

cal

Faci

lity

Additional facility

2 LIST OF ACRONYMS AASA Anjum Asim Shahid Associates

ABS Asset Backed Securities

ADB Asian Development Bank

AMC Authorized Money Changers

AML Anti Money Laundering

ATM Automated Teller Machine

BCO Banking Companies Ordinance

BCP Business Continuation Process

BID Banking Inspection Department

BIS Bank of International Settlement

BoD Board of Director

BPD Banking Policy Department

BPR Business Process Re-engineering

BSD Banking Supervision Department

CAA Civil Aviation Authority

CAELS Offsite surveillance framework, which gauges the Capital adequacy, Asset quality, Earnings and profitability, Liquidity and Sensitivity to market risk

CAMELS-S Onsite inspection framework, which gauges the Capital adequacy, Asset quality, Management soundness, Earnings and profitability, Liquidity, Sensitivity to market risk and System and controls

CIB Credit Information Bureau

CMAD Corporate and Media Affairs Department

CMT Corporate Management Team

DFI Development Financial Institutions

DW Data Warehouse

Eco PD Economic Policy Department

EDMD Exchange & Debt Management Department

ENB Electronic Notice Board

EPD Exchange Policy Department

ERP Enterprise Resource Planning

FBS Federal Bureau of Statistics

24

FERA Foreign Exchange Regulation Act

FIU Financial Intelligence Unit

FTP Fit and Proper Test

GoP Government of Pakistan

HoD Head of Department

HRD Human Resources Department

IBD Islamic Banking Department

IDBP Industrial Development Bank of Pakistan

IMF International Monetary Fund

IRAF Institutional Risk Assessment Framework

ISD Information Systems Department

IT Information Technology

KYC Know Your Customer

MBS Mortgage Backed Securities

MERPC Monetary and Exchange Rate Policy Commitee

MIS Management Information System

NAB National Accountability Bureau

NBFC Non-bank Finance Companies

NBFI Non-bank Finance Institutions

NCB Nationalized Commercial Banks

NDFC National Development Finance Corporation

NIBAF National Institute of Banking and Finance

NSS National Saving Scheme

OMO Open Market Operation

PBA Pakistan Banks Association

PCA Prompt Corrective regime

PIB Pakistan Investment Bond

PIFRA Project for implementation of Financial Reporting and Accounting

PKI Public Key Infrastructure

PMO Project Management Office

PMS Performance Management System

25

PR Prudential Regulation

PSD Payment System Department

RTGS Real Time Gross Settlement System

SBP State Bank of Pakistan

SBP BSC State Bank of Pakistan Banking Services Corporation

SECP Securities and Exchange Commission of Pakistan

SMC Strategic Management Conference

SME Small and Medium Enterprises

SMEDA Small and Medium Enterprise Development Authority

SPU Strategic Planning Unit

SWIFT Society for Worldwide Inter-bank Financial Telecommunication

TFC Term Finance Certificates

ZTBL Zarai Taraqiati Bank Limited

Strategic Planning Unit State Bank of Pakistan